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— Property Management Quarterly — February 2015
O
ne of my favorite colloqui-
alisms that I apply often
to the world of property
management stems from a
prison term declaration of,
“You know it’s a Thursday when …”
(Call me if you want me to explain
it in terms you’ll never, ever forget.)
For example, you know it’s a Thurs-
day when you receive a call from
a tenant or an owner asking you,
as property manager, this taunting
question: “Have you read the lease?”
This simple question cuts right
to the quick and clearly separates
the “wheat” from the “chaff,” or in
other words, great property manag-
ers from the mediocre/soon-to-be
unemployed property managers.
You know it’s a Thursday when
you receive a call from a tenant
commenting on recent construction
occurring in the space adjacent to
his offices. “Have you read my lease,
specifically paragraph 17, which
sets forth my first right of refusal
on this space?”
I am so allergic to these devas-
tating lease provisions that seem
to lurk in the lease document and
often are forgotten. They have
“teeth,” which can cause much
financial hardship for all parties
concerned. A great property manag-
er would have personally abstracted
all of the leases in the building,
noting any first rights, options and
early termination rights, and would
have satisfied any
notice require-
ment.
You know it’s a
Thursday when
you receive writ-
ten notice from a
tenant exercising
his “early right to
terminate” upon
30 days’ written
notice, for his cur-
rent lease, which
expires June 2019.
Regardless that
this “right” was
hidden and buried in the Miscel-
laneous Provisions of the lease, spe-
cifically 37z, a great property man-
ager would have thoroughly read
and abstracted the lease, noting
this early out option, and advised
the landlord, brokers, attorneys and
even their mothers of this terrify-
ing provision. Missing this provision
during due diligence or transition-
ing the building from another prop-
erty management company will
cause early heart failure!
You know it’s a Thursday when
you receive written notice from
a tenant via his attorney that the
“operating expense reconciliations”
for the past three years were not
calculated correctly. They are now
making a demand for reimburse-
ment for all past year’s overpay-
ments.
A great property manager would
never rely on the calculations made
by previous property managers.
Rather, he will carefully analyze and
read the lease provisions regarding
operating expenses and make his
own determination as to the proper
and accurate way to reconcile. And
if there is any question, whatsoever,
regarding the proper calculation,
great property managers will seek
other competent professionals to
read, understand and verify the cor-
rect way to calculate this provision.
There must be consistency and a
meeting of the minds between all
the parties to the lease.
Sadly, what is of greater concern
is that in many buildings there are
several different lease forms, rather
than just one. These forms are often
drafted by who knows, and each
contains completely different oper-
ating expense provisions. It is an
absolute nightmare.
I am also completely allergic to
“caps” on operating expense pro-
visions. It’s amazing to see the
audacity of anyone wanting to dif-
ferentiate between controllable and
uncontrollable expenses and then
throwing a cap in the mix. In my
opinion, caps should be banned for-
ever!
You know it’s a dreadful Thursday
when you receive a letter from the
attorney for the “guarantor” noti-
fying you that his client was not
properly notified of previous lease
amendments and is therefore no
longer bound as guarantor under the
lease. A great property manager and
owner’s legal counsel would have
properly notified the guarantor and
all parties of concern, with each lease
amendment, thus eliminating this
costly error, aka heart failure.
You definitely know it’s a Thursday
when your owner calls your attention
to the invoice for heating, ventilating
and air-conditioning maintenance
that you approved, which is actually
the tenant’s responsibility under the
lease. There is an awkward silence
that is deafening when asked wheth-
er the manager had read the lease
before stepping into the shoes of the
tenant and assuming the tenant’s
Legal
Steven S.
Sessions
CEO,
Sessions Group,
Denver
• First right of refusal
• Early right to terminate
• Options to renew
• Caps on operating expenses
• Notification rights
• Maintenance responsibilities
• Constructive eviction
Take note of these
hidden lease provisions
